Exhibit 99.1

axogen-inc-logo.jpg

 

AxoGen, Inc. Reports

2016 Fourth Quarter and Full Year Financial Results

 

Record Q4 Revenue of $11.4 million, representing 46% growth over prior year

Record Full year 2016 Revenue of $41.1 million, representing 50% growth over prior year

 

ALACHUA, FL – February 22, 2017 – AxoGen, Inc. (NASDAQ: AXGN), a global leader in developing and marketing innovative surgical solutions for peripheral nerve injuries, today reported financial results and business highlights for the fourth quarter and full year ended December 31, 2016.

 

Fourth Quarter 2016 Financial Results and Recent Business Highlights

 

·

Revenue of $11.4 million, up 46% compared to $7.8 million in the fourth quarter of 2015

·

Gross margin of 84.0% compared to 81.9% in the fourth quarter of 2015

·

EBITDA loss of $2.6 million compared to EBITDA loss of $2.6 million in Q4 2015

·

Appointed renowned nerve surgeon Ivan Ducic M.D., Ph.D. as Medical Director

·

Launched Avive™ Soft Tissue Membrane in November

·

Raised $18.6 million in net proceeds through a public offering of common stock on October 13th

·

Refinanced $25.0 million debt facility on October 25th, which will reduce annual interest costs by at least $1.5 million

·

Adjusted net loss for the fourth quarter of 2016 was $3.2 million, or $0.10 per share, compared with a net loss of $3.6 million, or $0.12 per share, in the fourth quarter of 2015

 

"We are pleased to complete another successful quarter, with record revenues of $11.4 million and growth of 46 percent,” stated Karen Zaderej, President and Chief Executive Officer. “We also made several important strategic advancements in the quarter, including the launch of Avive™ Soft Tissue Membrane, continued expansion of our sales team, the launch of new market development activities in breast reconstruction neurotization and the repair of lower limb iatrogenic nerve injuries, as well as our continued efforts in surgeon education. We believe these efforts, combined with our recent equity raise and debt refinancing, demonstrate our ability to successfully execute our strategy and have positioned us to continue to drive awareness and growth in the emerging peripheral nerve repair market in 2017.”

 

Additional Fourth Quarter Operational Highlights

 

·

Increased active accounts in the fourth quarter to 452, up 41% from 320 a year ago

·

Ended the quarter with 51 direct sales representatives and 20 independent distributors

·

Conducted four national education courses in the fourth quarter

·

Increased the number of peer reviewed clinical publications for our surgical portfolio by five to a total of 44

·

Conducted a breast reconstruction neurotization meeting with eight key opinion leading surgeons to review mastectomy patient challenges and concerns as well as surgical techniques that may allow


 

for the return of breast sensation for women who choose autologous reconstruction following a mastectomy

·

Reported positive clinical data from our MATCH study, a subset of the RANGER® registry  finding Avance® Nerve Graft, with a meaningful recovery rate of 85%, provided a statistically significant difference with regard to return of meaningful sensory function as compared to manufactured conduits, which only provided a meaningful recovery rate of 51%

·

Expanded the clinical data set in Oral and Maxillofacial Surgery to include nerve reconstruction following the removal of benign facial tumors, with two separate investigator initiated studies finding promising results for large gap defects of up to 70 mm and results that are consistent with our previously reported RANGER® registry

·

Ended the quarter with $30 million in cash compared to $16 million at the end of the Q3. The $14 million net increase in cash was the result of the company’s $18.6 million equity raise in October, partially offset by debt refinancing fees paid of $2.9 million and net operating use of cash in Q4 of $1.7 million

·

Ended the quarter with $25 million of total bank debt, compared to $25 million at the end of Q3

 

Full Year 2016 Summary Financial Results and Recent Business Highlights

 

·

2016 Revenue of $41.1 million, an increase of 50% compared to $27.3 million for the prior year

·

Gross margin of 84.3% compared to 82.3% in 2015

·

Improved EBITDA loss to $7.7 million compared to EBITDA loss of $9.0 million in 2015

·

Completed 13 national education courses in 2016 and expect to conduct 15 courses in 2017

·

Launched two new products including Avive™ Soft Tissue Membrane and AcroVal™ Neurosensory & Motor Testing System

·

Appointed former Covidien senior executive Amy Wendell to the Board of Directors

·

Expanded leadership team with the appointment of Peter Mariani as Chief Financial Officer, Kevin Leach as Vice President of Marketing, and Dr. Ivaca “Ivan” Ducic MD, PhD as Medical Director

 

“We strengthened our strategic capabilities during 2016, which resulted in improved clinical and commercial execution,” continued Zaderej. “We believe our record revenue of $41.1 million and 50 percent growth demonstrate our ability to continue to lead this developing nerve repair market.”

 

2017 Financial Guidance

 

Management reiterates 2017 annual revenue will grow at least 40% over 2016 revenue and gross margins will remain above 80%.

 

Upcoming Investor Events

 

Members of the AxoGen senior management team will participate at the following upcoming conferences:

 

·

BTIG Annual Medical Technology, Diagnostics, and Healthcare IT Conference in Snowbird, Utah, March 1-2

·

29th Annual ROTH Conference in Dana Point, CA on March 13

·

Canaccord Genuity Musculoskeletal Conference in San Diego, CA on March 14

·

Oppenheimer 27th Annual Healthcare Conference in New York City, NY, March 21

 


 

Management’s Assessment of Internal Controls

 

The Company’s market capitalization has increased to a level such that its annual assessment of the effectiveness of its internal controls over financial reporting must now be audited, and the result of that audit will be included in its Form 10-K as of December 31, 2016 in compliance with the provisions of Sarbanes Oxley section 404. The Company expects to report material weaknesses in its internal control as of December 31, 2016 related to the design and operation of key controls around the calculations of significant judgment and estimates, as well as quarterly cycle count procedures associated with consigned inventories.

 

Management’s assessment has not resulted in any changes of prior period financial results or statements.

 

The Company has reviewed and modified the design of internal controls over financial reporting and will continue to make additional modifications as necessary. The material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Conference Call

 

The Company will host a conference call and webcast for the investment community today at 4:30 p.m. ET. Investors interested in participating by phone are invited to call toll free at 1-877-407-0993 or use the direct dial-in number 1- 201-689-8795. Those interested in listening to the conference call live via the Internet can do so by visiting the Investors page of the Company’s website at www.axogeninc.com and clicking on the webcast link on the Investors home page.

 

Following the conference call, a replay will be available on the Company’s website at www.axogeninc.com under Investors.

 

About AxoGen, Inc.

 

AxoGen (AXGN) is a global leader in innovative surgical solutions for peripheral nerve injuries. AxoGen's portfolio of products includes Avance®  Nerve Graft, an off-the-shelf processed human nerve allograft for bridging severed nerves without the comorbidities associated with a second surgical site, AxoGuard®  Nerve Connector, a porcine submucosa extracellular matrix (ECM) coaptation aid for tensionless repair of severed nerves, AxoGuard®  Nerve Protector, a porcine submucosa ECM product used to wrap and protect injured peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments, and Avive™  Soft Tissue Membrane, a minimally processed human umbilical cord membrane that may be used as a resorbable soft tissue covering to separate tissue layers and modulate inflammation in the surgical bed. Along with these core surgical products, AxoGen also offers AxoTouch™  Two-Point Discriminator and AcroVal™  Neurosensory & Motor Testing System. These evaluation and measurement tools assist health care professionals in detecting changes in sensation, assessing return of sensory, grip, and pinch function, evaluating effective treatment interventions, and providing feedback to patients on nerve function. The AxoGen portfolio of products is available in the United States, Canada, the United Kingdom, and several other European and international countries.

 

Cautionary Statements Concerning Forward-Looking Statements

 

This Press Release contains "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or predictions of future conditions, events, or results based on various assumptions and management's estimates of trends


 

and economic factors in the markets in which we are active, as well as our business plans. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "continue," "may," "should," "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements may include, without limitation, statements regarding our assessment on our internal control over financial reporting, statements regarding our growth, our 2017 guidance, product development, product potential, financial performance, sales growth, product adoption, market awareness of our products, data validation, and our visibility at and sponsorship of conferences and educational events. The forward-looking statements are subject to risks and uncertainties, which may cause results to differ materially from those set forth in the statements. These risks include, but are not limited to, the potential that we or our independent auditors may identify additional control deficiencies in our internal control over financial reporting, including deficiencies that constitute material weaknesses within the meaning of the accounting requirements. Forward-looking statements in this release should be evaluated together with the many uncertainties that affect AxoGen's business and its market, particularly those discussed in the risk factors and cautionary statements in AxoGen's filings with the Securities and Exchange Commission. Forward- looking statements are not guarantees of future performance and actual results may differ materially from those projected. The forward-looking statements are representative only as of the date they are made and, except as required by law, AxoGen assumes no responsibility to update any forward-looking statements whether as a result of new information, future events, or otherwise.

 

Contacts:

 

AxoGen, Inc.

Peter J. Mariani, Chief Financial Officer

InvestorRelations@AxoGenInc.com

 

The Trout Group – Investor Relations

Brian Korb

646.378.2923

bkorb@troutgroup.com 


 

AXOGEN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

    

2016

    

2015

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

30,014,405 

 

$

25,909,500 

 

Accounts receivable, net

 

 

8,052,203 

 

 

4,782,989 

 

Inventory

 

 

5,458,840 

 

 

3,933,960 

 

Prepaid expenses and other

 

 

511,804 

 

 

424,925 

 

Total current assets

 

 

44,037,252 

 

 

35,051,374 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,494,247 

 

 

970,870 

 

Intangible assets

 

 

828,979 

 

 

678,082 

 

 

 

$

46,360,478 

 

$

36,700,326 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Borrowings under revolving loan agreement

 

$

4,025,023 

 

$

 

Accounts payable and accrued expenses

 

 

7,002,165 

 

 

3,695,127 

 

Current maturities of long term obligations

 

 

20,899 

 

 

 

Deferred revenue, current

 

 

33,282 

 

 

14,118 

 

Total current liabilities

 

 

11,081,369 

 

 

3,709,245 

 

Note Payable -  Revenue Interest Purchase Agreement, net

 

 

 

 

24,701,693 

 

Long Term Obligations, net of current maturities and deferred financing fees

 

 

20,265,745 

 

 

 

Deferred revenue

 

 

92,215 

 

 

93,797 

 

Total liabilities

 

 

31,439,329 

 

 

28,504,735 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Common stock, $.01 par value; 50,000,000 shares authorized; 33,008,865 and 29,984,591 shares issued and outstanding

 

 

330,088 

 

 

299,846 

 

Additional paid-in capital

 

 

132,474,884 

 

 

111,368,424 

 

Accumulated deficit

 

 

(117,883,823)

 

 

(103,472,679)

 

Total shareholders’ equity

 

 

14,921,149 

 

 

8,195,591 

 

 

 

$

46,360,478 

 

$

36,700,326 

 

 


 

AXOGEN, INC.

CONDENSED CONSONLIDATED STATEMENTS OF OPERATIONS

Three Months and Years ended December 31, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

    

2016

    

2015

    

2016

    

2015

 

Revenues

 

$

11,408,672 

 

$

7,808,848 

 

$

41,107,538 

 

$

27,331,092 

 

Cost of goods sold

 

 

1,829,804 

 

 

1,415,258 

 

 

6,467,250 

 

 

4,848,396 

 

Gross profit

 

 

9,578,868 

 

 

6,393,590 

 

 

34,640,288 

 

 

22,482,696 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

8,349,206 

 

 

5,831,972 

 

 

28,425,503 

 

 

20,089,369 

 

Research and development

 

 

1,178,502 

 

 

893,721 

 

 

4,212,023 

 

 

3,237,171 

 

General and administrative

 

 

2,770,561 

 

 

2,319,808 

 

 

10,132,624 

 

 

8,422,866 

 

Total costs and expenses

 

 

12,298,269 

 

 

9,045,501 

 

 

42,770,150 

 

 

31,749,406 

 

Loss from operations

 

 

(2,719,401)

 

 

(2,651,911)

 

 

(8,129,862)

 

 

(9,266,710)

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,130,694)

 

 

(927,840)

 

 

(5,386,268)

 

 

(3,988,619)

 

Interest expense—deferred financing costs

 

 

(780,135)

 

 

(31,537)

 

 

(875,389)

 

 

(127,912)

 

Other income (expense)

 

 

3,246 

 

 

(205)

 

 

(19,625)

 

 

26,816 

 

Total other income (expense)

 

 

(2,907,583)

 

 

(959,582)

 

 

(6,281,282)

 

 

(4,089,715)

 

Net loss

 

$

(5,626,984)

 

$

(3,611,493)

 

$

(14,411,144)

 

$

(13,356,425)

 

Weighted Average Common Shares outstanding – basic and diluted

 

 

32,567,893 

 

 

29,926,001 

 

 

30,702,164 

 

 

26,075,670 

 

Loss Per Common share - basic and diluted

 

$

(0.17)

 

$

(0.12)

 

$

(0.47)

 

$

(0.51)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net loss

 

$

(3,176,379)

 

$

(3,611,494)

 

$

(11,960,539)

 

$

(13,356,425)

 

Adjusted net loss per Common share

 

$

(0.10)

 

$

(0.12)

 

$

(0.39)

 

$

(0.51)

 

 


 

AXOGEN, INC.

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

Three Months and Years ended December 31, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

    

2016

    

2015

    

2016

    

2015

 

Net loss

 

$

(5,626,984)

 

$

(3,611,493)

 

$

(14,411,144)

 

$

(13,356,425)

 

Depreciation and amortization expense

 

 

98,484 

 

 

61,102 

 

 

361,617 

 

 

203,140 

 

Amortization expense of intangible assets

 

 

26,821 

 

 

11,819 

 

 

74,871 

 

 

45,828 

 

Interest expense

 

 

2,130,694 

 

 

927,840 

 

 

5,386,268 

 

 

3,988,619 

 

Interest expense - deferred financing costs

 

 

780,135 

 

 

31,537 

 

 

875,389 

 

 

127,912 

 

EBITDA – non GAAP

 

$

(2,590,850)

 

$

(2,579,195)

 

$

(7,712,999)

 

$

(8,990,926)

 

 


 

AXOGEN, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED NET LOSS

Three Months and Years ended December 31, 2016 and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

    

2016

    

2015

    

2016

    

2015

 

Net loss

 

$

(5,626,984)

 

$

(3,611,493)

 

$

(14,411,144)

 

$

(13,356,425)

 

Prepayment fees net of accrued interest

 

 

1,700,131 

 

 

 

 

 

1,700,131 

 

 

 

 

Write off of deferred financing fees

 

 

750,474 

 

 

 

 

 

750,474 

 

 

 

 

Adjusted Net Loss

 

$

(3,176,379)

 

$

(3,611,493)

 

$

(11,960,539)

 

$

(13,356,425)

 

Adjusted net loss per Common share

 

$

(0.10)

 

$

(0.12)

 

$

(0.39)

 

$

(0.51)

 

 


 

AXOGEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2016 and 2015 

 

 

 

 

 

 

 

 

 

 

    

2016 

    

2015 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(14,411,144)

 

$

(13,356,425)

 

Adjustments to reconcile net loss to net cash used for operating activities:

 

 

 

 

 

 

 

Depreciation

 

 

361,617 

 

 

203,140 

 

Amortization of intangible assets

 

 

74,871 

 

 

45,828 

 

Amortization of deferred financing costs

 

 

124,915 

 

 

127,913 

 

Write off of deferred financing costs

 

 

750,474 

 

 

 

Provision for bad debts

 

 

79,593 

 

 

125,371 

 

Stock-based compensation

 

 

1,390,277 

 

 

1,316,509 

 

Interest added to note

 

 

1,924,279 

 

 

461,643 

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,348,807)

 

 

(2,036,052)

 

Inventory

 

 

(1,524,880)

 

 

(720,340)

 

Prepaid expenses and other

 

 

(86,879)

 

 

(315,556)

 

Accounts payable and accrued expenses

 

 

3,443,660 

 

 

1,117,733 

 

Deferred Revenue

 

 

17,582 

 

 

21,583)

 

Net cash used for operating activities

 

 

(11,204,442)

 

 

(13,051,819)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(963,787)

 

 

(408,782)

 

Acquisition of intangible assets

 

 

(225,768)

 

 

(146,736)

 

Net cash used for investing activities

 

 

(1,189,555)

 

 

(555,518)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

18,668,092 

 

 

30,968,386 

 

Borrowing on revolving loan

 

 

6,684,894 

 

 

 

Payments on revolving loan

 

 

(6,684,894)

 

 

 

Repayments of long term debt

 

 

(2,446,676)

 

 

 

Debt issuance costs

 

 

(800,847)

 

 

(180,139)

 

Proceeds from exercise of stock options

 

 

1,078,333 

 

 

512,799 

 

Net cash provided by financing activities

 

 

16,498,902 

 

 

31,301,046 

 

Net increase in cash and cash equivalents

 

 

4,104,905 

 

 

17,693,709 

 

Cash and cash equivalents, beginning of year

 

 

25,909,500 

 

 

8,215,791 

 

Cash and cash equivalents, end of period

 

$

30,014,405 

 

$

25,909,500 

 

Supplemental disclosures of cash flow activity:

 

 

 

 

 

 

 

Cash paid for interest

 

$

5,769,372 

 

$

3,525,978 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

Payments of fixed assets in accounts payable

 

$

32,153 

 

$

168,775 

 

Payments of long term debt with proceeds from term loan of $21,000,000 and revolver loan of $4,000,000

 

 

25,000,000